Airlines, Chicago reach deal on O’Hare expansion

American and United have inked a $1.17 billion agreement with the city of Chicago to add runway capacity at O’Hare Airport, said the Department of Transportation on Monday.

With an agreement in place, United and American have dropped their joint lawsuit against the city, which the airlines filed in January.

The airlines had sought to block the city’s bond sale to finance a part of the project. The airlines indicated that their portion of the bill was exorbitant given that the additional runway capacity wouldn’t be needed for many years.

DOT Secretary Ray LaHood brokered the deal. According to the Chicago Tribune, the DOT provided an additional $155 million on top of the approximately $1 billion in federal funding already committed to the O’Hare modernization project. Illinois senators Dick Durbin and Mark Kirk also facilitated the agreement.

In his Fast Lane blog, LaHood said, "Adding capacity to America's second-busiest airport will improve service for air travelers across the country. Because 64 million passengers use O'Hare each year — connecting to 130 domestic airports — anything we can do to move airplanes in and out more safely and efficiently has national economic significance."

United CEO Jeff Smisek said the O’Hare deal “recognizes the economic realities we all face.”

American CEO Gerard Arpey said, "We appreciate the extraordinary efforts of Secretary Ray LaHood and Senators Dick Durbin and Mark Kirk of Illinois, in helping to reach an agreement that carefully balances the legitimate concerns of all the parties, allows us to move forward in a deliberate and prudent way, and resolves our legal disputes."

The $1.17 billion will pay for a new south runway slated for completion in 2015 and "other airfield improvements," said the DOT.

The parties have agreed to begin negotiating the terms and timing of the remaining airfield components of the $3.4 billion second phase of the O'Hare modernization project no later than March 1, 2013.

The airlines and Chicago Mayor Richard Daley agreed to divide the $3.4 billion second phase into two parts instead of one.